Kansas lawmakers’ tax plan makes numerous policy changes

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Topeka  A plan approved by Kansas legislators for balancing the state budget would increase sales and cigarette taxes but also make numerous other policy changes.

Lawmakers passed two bills that together would raise $384 million during the fiscal year July 1. A deficit would be averted, but Republican legislators who drafted the plan acknowledged that GOP Gov. Sam Brownback still might have to cut up to $50 million in spending to ensure that the state has a small cushion of cash reserves going into July 2016.

Following is a look at the plan.

Sales tax

The state's sales tax would increase in July to 6.5 percent from 6.15 percent.

Legislators considered dropping the sales tax on food to as little as 4.95 percent but didn't include a proposal in the final version.

They also considered but dropped a proposal to repeal most sales tax exemptions in 2020 and set up a commission to study which ones should be preserved.

Cigarette tax

The state's cigarette tax would increase in July by 50 cents a pack, to $1.29 from 79 cents. Starting in July 2016, the state would impose its first tax on electronic cigarettes, 20 cents per milliliter of consumable material.

Business taxes

The plan would modify a 2012 policy that ended income taxes on the profits of 281,000 business owners and 53,000 farmers. They would have to pay income taxes on any payments they guarantee themselves from their businesses, regardless of their profits. The change is estimated to raise $24 million during the next fiscal year.

Income taxes

Most itemized personal income tax deductions would be eliminated, effective Jan. 1 of this year. The only remaining deductions would be for charitable contributions, half of the property taxes a homeowner pays and half of the interest paid on a home mortgage.

For 2016, the state would eliminate personal income taxes for 388,000 low-income filers. The Department of Revenue has said the exemption would apply to some individuals earning up to $17,250 a year and to couples earning up to $24,500.

The state would revise its promise to cut personal income tax rates in the future. The bottom rate is 2.7 percent and had been set to go to 2.3 percent for 2018; the top rate is 4.6 percent and had been set to drop to 3.9 percent for 2018. Instead, the bottom rate would drop to 2.6 percent for 2018 and stay at 4.6 percent.

Starting in 2020, the state automatically would cut its rates in the future if its revenues grew. Growth would have to exceed 2.5 percent, plus whatever the state needed to cover rising public pension costs.

Property taxes

Starting in 2018, cities and counties could not budget an increase in property tax revenues above the rate of inflation as measured by the consumer price index without the approval by voters. There would be some exceptions, including spending to cover bond payments, finance new infrastructure, improve roads, or pay legal judgments. The change is aimed at forcing a reduction in tax levies if property values rise.

Private school scholarships

More at-risk students would be eligible for private school scholarships under a program created last year to help at-risk students, kindergarten through 12th grade.

The program gives corporate income tax credits totaling $10 million a year to businesses contributing to groups that award scholarships for at-risk students. The amount of tax credits would not increase, however.

Also, the funds could flow directly from the groups to the schools, rather than the parents.

Tax amnesty

The Department of Revenue will be allowed to waive penalties and interest for any delinquent taxpayers who settle their bills in full from Sept. 1 to Oct. 15.

Online:

Summary of first tax bill: http://bit.ly/1F3xHBu

Summary of the second bill, which modifies the first: http://bit.ly/1KOuw7V